USA – CALIFORNIA Trends and Developments Contributed by: Bahram Seyedin-Noor, Jared Kopel, Joshua Korr and Monica Eno, Alto Litigation
client securities and funds were protected against theft or misuse. The SEC alleged that those failures led to the loss of more than USD6.6 million following two cyberintrusions. Equiniti Trust Company LLC agreed to pay a civil penalty of USD850,000. The SEC’s inves- tigation was, not surprisingly, run from its San Francisco Regional Office. • On 11 June 2024, Okta, Inc agreed to pay USD60 million to settle a securities class action lawsuit alleging Okta, Inc and its officers made false or misleading state- ments regarding a data breach that impacted hundreds of its clients. Okta, Inc had moved to dismiss the action and was partially suc- cessful, but the court held that the plaintiffs adequately alleged claims concerning state- ments made on earnings calls (In re Okta, Inc Sec Litig, 2023 WL 2749193 (ND Cal 21 March 2023). • Zoom, Inc agreed to pay USD150 million to settle class action claims that it made false or misleading statements regarding its encryp- tion of video calls and the sufficiency of its data privacy and security measures. Specifi- cally, Zoom, Inc claimed it offered “robust security capabilities, including end-to-end encryption, secure login, administrative controls and role-based access controls” in a 2019 Registration Statement and Prospec- tus. The parties submitted an amended order preliminarily approving settlement to the Hon Judge Donato of the Northern District of Cali- fornia on 18 July 2024 (In re Zoom Sec Litig, Case No 3:20-cv-02353-JD (ND Cal). • On 30 September 2024, the Hon Judge Thompson of the Northern District granted final approval of a settlement of securities claims against Alphabet, Inc, which requires the defendant to pay USD350 million. The plaintiff had alleged that Alphabet, Inc failed to disclose a security vulnerability that
resulted in users’ data being accessible by third-party developers for more than three years (In re Alphabet, Inc Sec Litig, Case No 18-cv-06245-TLT (ND Cal). New climate disclosure laws may lead to new disclosure claims On 7 October 2023, California Governor Gavin Newsom signed two bills into law, which collec- tively will require thousands of companies doing business in California to disclose greenhouse gas emissions and climate-related financial information. These laws are being challenged in civil litigation pending in the US District Court for the Central District of California. SB 253, the California Climate Corporate Data Accountability Act (CCDAA), applies both to private and public companies with total annu- al revenues exceeding USD1 billion and will require disclosures regarding several categories of greenhouse gas emissions, including those resulting indirectly from a company’s entire sup- ply chain. SB 261, the Climate-Related Financial Risk Act (CRFRA), applies to companies with total annual revenues exceeding USD500 million and will require – among other things – compa- nies doing business in California to prepare and submit biennial climate-financial risk reports. The first disclosures under the two bills will be required in 2026. In Chamber of Commerce v California Air Resources Board, Case No 2:24-CV-00801 (CD Cal), a coalition of business interests led by the United States Chamber of Commerce seeks to enjoin enforcement of these laws on several grounds. First, plaintiffs contend that the laws violate the First Amendment of the US Constitu - tion because they compel speech “untethered to any commercial purpose or transaction… for the explicit purpose of placing political and econom-
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